WASHINGTON ― Russia’s war on Ukraine could spike gasoline prices in the U.S., increasing overall inflation as well as the odds of a layoff-inducing slowdown.
“Recession risks later this year and into next are now uncomfortably high,” Mark Zandi, chief economist at Moody’s Analytics, said in an email.
The Federal Reserve will try to stem inflation by hiking interest rates this year, making it more expensive to borrow money, meaning less for people to spend on goods and services. Skyrocketing gas prices could prod the Fed into more aggressive monetary “tightening” than it has already planned.
“The odds that the Fed missteps, and tightens too aggressively are material and rising,” Zandi said. “Landing the economic plane on the tarmac was already going to be difficult for the Fed because of the pandemic and high inflation, but Russia’s invasion makes it more likely the economic plane hits the tarmac hard or even…